During the meeting, Kim ordered frontline, combined units of the Korean People's Army (KPA) to "enter a wartime state" from Friday 5pm local time (08:00 GMT).

The troops should be "fully battle ready to launch surprise operations" while the entire frontline should be placed in a "semi-war state," KCNA quoted him as saying.

The CMC meeting came hours after the two Koreas traded artillery fire on Thursday, leaving no apparent casualties but pushing already elevated cross-border tensions to dangerously high levels.

The KPA followed up with an ultimatum sent via military hotline that gave the South 48 hours to dismantle loudspeakers blasting propaganda messages across the border or face further military action.

The ultimatum expires on Saturday at 5pm.

The 1950-53 Korean War, which ended with an armistice, left the Korean Peninsula technically in a state of war [AP]

The South's defence ministry dismissed the threat and said the broadcasts would continue.

The North committed "cowardly criminal acts," South Korean Defence Minister Han Min-koo said. "This time, I will make sure to sever the vicious cycle of North Korea's provocations."

Residents of Yeoncheon, the area where the South said a shell from the North landed, were told to evacuate and head to bomb shelters.

"Living in this area, I’ve seen many drills and heard explosions," Shin Hyun-chang told Al Jazeera. "But this time, the sound was louder. And there was an announcement asking us to evacuate. Compared to the past, I'm more concerned."

Thursday's artillery exchange in a western quarter of the border came amid heightened tensions following mine blasts that maimed two members of a South Korean border patrol earlier this month and the launch this week of a major South Korea-US military exercise that angered North Korea.

South Korea said the mines were placed by the North and responded by resuming propaganda broadcasts across the border, using loudspeakers that had remained silent for more than a decade.

New to Al Jazeera box 2 [Al Jazeera]

The South Korean military said the North side fired first on Thursday and that it retaliated with dozens of 155mm howitzer gun rounds.

South Korean troops were placed on maximum alert, while President Park Geun-hye chaired an emergency meeting of her National Security Council and ordered a "stern response" to any further provocations.

The CMC meeting in Pyongyang insisted that the situation would only de-escalate if South Korea turned off the propaganda loudspeakers.

The US and UN both said they were following the situation on the Korean peninsula with deep concern.

The US State Department urged North Korea to avoid provoking any further escalation and said it remained "steadfast" in its commitment to defending ally South Korea.

Dozens of people on the South Korean side of the border were evacuated to underground bunkers when the North's shell fell [AP]